Ballmer Promotes 'New Efficiency' Vision for IT

Microsoft's CEO Steve Ballmer gave a keynote talk at a Microsoft event called "The New Efficiency" on Tuesday.

The presentation, broadcast from San Francisco, was a marketing pitch featuring comments from several of Microsoft's early-adopter Windows 7 customers. The event was billed as a launch of Windows 7, Windows Server 2008 R2 and Exchange 2010, among other Microsoft products. A recorded version of the talk is available here.

Ballmer took the position that IT pros can do more with less and still innovate by using Microsoft products -- even in the present down economy, which he described as "a reset" or "the new normal." His position was supported by on-stage testimonials from executives at Continental Airlines, Ford, Intel and Starwood Hotels on the efficiencies to be derived from Microsoft's products.

Ballmer said that IT budgets "have been reset down" and that Microsoft would have to demonstrate how its products can help IT departments do more with less. In a Q&A session, Ballmer even suggested that restricted budgets represented a kind of "freedom" for IT departments looking to set priorities.

"One of the interesting things about budget reductions is once the new budget's in place…in a sense, the budget sets you free," Ballmer said. "You know you can't petition. We don't live in a world where it'll be very easy to petition the business for more money. So it really gets to be a question of tradeoffs. Within the new normal, the new IT budget, what really is of highest priority -- what migrations, what transition?"

Ballmer paused his talk for an on-stage presentation demonstrating how Microsoft's Office Web Apps, scheduled for release in the first half of next year, could be used to boost worker productivity while complying with corporate security requirements.

A presentation of the Outlook Web App showed how company security policies could be enforced for remote workers using DirectAccess, a feature available in the Enterprise edition of Windows 7. Per the demonstration, DirectAccess allowed a remote worker to access a document on the company server without having to use a virtual private network (VPN) connection. The remote worker used Microsoft's Excel Web App to manipulate charts -- all done using a browser.

"There was no VPN, yet the level of security was as good as a VPN," Ballmer commented about the demo.

He also gave a pitch for Microsoft's hosted applications, which amount to a form of outsourcing for many IT organizations.

"We've seen an incredible wave of interest in what we're doing with Exchange Online and SharePoint Online," Ballmer said. "The biggest part of the IT budget in every company is in running the things that you do today. Every dime you can save in the run budget becomes a dime you can reinvest in the innovate budget."

Ballmer was asked whether the down economy implied that innovation would be diminished in businesses, replaced by the concept of "good enough."

"No," Ballmer said. "The truth is, you will get pushed to be efficient. Which means you are going to take the cost out of some things [that] you are doing today to do new things -- innovative things -- for tomorrow."

Ballmer acknowledged a tough sales job ahead. He noted that most in the audience, in a quick show of hands, thought that future IT budgets would be on the decline.

Software actually appeared to be one of the better-off segments when Forrester Research took a poll of IT spending trends in the enterprise in North America and Europe. Forrester estimated that software spending would "hold steady" in the enterprise in 2009 compared with a year ago.

The report, "The State of Enterprise Software: 2009," found that enterprises had allocated about 16 percent of their IT operating budgets toward software costs in 2008, with plans to boost that spending to 17 percent in 2009. Forrester predicted a similar flat trend for "new software initiatives and projects," with spending rising from 33 percent in 2008 to 34 percent in 2009.

A separate Forrester Report, "US Enterprise Versus SMB IT Budgets in 2009," predicted that small-to-medium businesses would decline as promising business target for software vendors. The current bad economy has changed that dynamic.

"Contrary to past experience, small and medium-size business (SMB) IT spending will decline more than enterprise IT spending as SMBs bear more of the pain from the housing sector collapse and the financial crisis," wrote Andrew Bartels, author of the report.